Fers Basic Benefit Calculation
The FERS basic annuity formula is actually pretty simple, and is based on your salary and years of service.
FERS Basic Annuity = High-3 Salary x Years of Service x 1%
And if you retire at age 62 or older with 20+ years of service, you get a slight bonus :
FERS Basic Annuity = High-3 Salary x Years of Service x 1.1%
How Can I Save More For Retirement
When it comes to saving for retirement, the first step is picking the best retirement account. If youre already saving in a retirement account, make sure youre contributing enough to get your employers full matching contribution and then put your contributions on autopilot.
These strategies have been proven to help people save more for retirement, but dont stop there. Make a plan to gradually boost the amount you contribute each year, preferably each time you receive a raise. For more, see our guide on how to save for retirement.
Start By Estimating Your Future Financial Needs
While this step takes work, and even some guessing, it can help you figure out how much youll need to put away today to live comfortably in your later years.
Start by calculating your current monthly expenses, including mortgage/rent, groceries, transportation, entertainment, utilities, and others. As you write each down, think about how they may change when you retire. For example, are you thinking youll downsize, so your mortgage will be cheaper? Because youll no longer be commuting to work, your gas and vehicle expenses will decrease? Write down your estimates for these expenses in retirement in another column or on another page.
Next, think about things you arent doing now that you will once you retire, or things youll be doing more of. For example, perhaps you want to travel more, play more golf, take lessons or start a new hobby, or purchase a vacation home. Add these estimated expenses to your retirement monthly budget.
Calculate a monthly total for your estimated retirement expenses. Then, multiply that by 12 to get an idea of how much income youll need each year to meet those expenses. Compare that to your current income, and this will allow you to calculate how much of your income you should aim to replace in retirement.
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How Much You Need For Retirement Varies But In General You Want To Replace 80% Of Your Pre
While most retirees will receive at least some Social Security retirement benefits, its typically not enough to support them through all the years of retirement. Thats why experts recommend saving at least 10-15% of your pre-tax income each year. However, how much you need to save for retirement ultimately depends on the type of lifestyle you want to live while retired, what your current and planned expenses will be, your life expectancy, and other factors.
Even though much of this is unknown, having a rough plan can help you figure out how much you need to save, and prepare in advance for finances in retirement. Here are three steps for figuring out how much you need to save, and other important factors to consider.
How You Want To Live In Retirement

In other words, do you expect your expenses to go down when you retire? We call that a below average lifestyle. Or will you spend as much as you do now? That’s average. If you expect your expenses will be more than they are now, that’s above average.
Let’s look at some hypothetical investors who are planning to retire at 67. Joe is planning to downsize and live frugally in retirement, so he expects his expenses to be lower. His savings factor might be closer to 8x than 10x. Elizabeth is planning to retire at age 67 and her goal is to maintain her lifestyle in retirement, so her savings factor is 10x. Sean sees retirement as an opportunity to travel extensively, so it may make sense for him to save more and plan for a higher level of retirement spending. His savings factor is 12x at age 67.
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Pensions 401s Individual Retirement Accounts And Other Savings Plans
401, 403, 457 Plan
In the U.S., two of the most popular ways to save for retirement include Employer Matching Programs such as the 401 and their offshoot, the 403 . 401s vary from company to company, but many employers offer a matching contribution up to a certain percentage of the gross income of the employee. For example, an employer may match up to 3% of an employee’s contribution to their 401 if this employee earned $60,000, the employer would contribute a maximum of $1,800 to the employee’s 401 that year. Only 6% of companies that offer 401s don’t make some sort of employer contribution. It is generally recommended to at least contribute the maximum amount that an employer will match.
Employer matching program contributions are made using pre-tax dollars. Funds are essentially allowed to grow tax-free until distributed. Only distributions are taxed as ordinary income in retirement, during which retirees most likely fall within a lower tax bracket. Please visit our 401K Calculator for more information about 401s.
IRA and Roth IRA
Pension Plans
In the U.S., pension plans were a popular form of saving for retirement in the past, but they have since fallen out of favor, largely due to increasing longevity there are fewer workers for each retired person. However, they can still be found in the public sector or traditional corporations.
For more information about or to do calculations involving pensions, please visit the Pension Calculator.
Investments and CDs
Consider Common Rules Of Thumb
According to the 2021 Employee Benefit Research Institutes retirement confidence survey, 7 in 10 workers are confident they will have enough money to live comfortably in retirement, but 1 in 3 workers say the COVID-19 pandemic negatively impacted their ability to save for retirement. If you need to adjust your retirement plan because of a job loss or other financial burden, it may be a good idea to keep some financial rules of thumb in mind.
The one used most often is the 80% rule, which says you should aim to replace 80% of your preretirement income. This is a loose rule: Some people suggest skewing toward 70% some think its better to aim for a more conservative 90%.
To figure out where you land, consider what percentage of your income youre saving for retirement. Youll no longer have to do that once you cross the hypothetical finish line, which means if youre saving 15% now, you could easily live on 85% of your income without adjusting expenses. Add in Social Security, cut payroll taxes which eat 7.65% of your income while youre working and you can probably adjust that income down even further.
» Learn more: Everything you need to know about how to save for retirement
The best way to use a rule of thumb like this is as a gut check against the more tailored approach of taking a deep dive into your expenses. Are you way off the standard advice or pretty close? But it can also be used as a starting point of its own, from where you can wiggle the numbers.
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If You Got A Late Start With Saving
Don’t despair if you start saving later in life. The best way to make up for getting a late start is to save harder.
The older you are, the more you should be saving and diversifying for retirement each month. Don’t over-allocate a portion of your savings to stocks with the thought that you need riskier investments to make up for lost decades of savings. Risk cuts both ways. You won’t have as much time to bounce back if your investments suffer.
Use index funds. Look for low-fee funds. Spread your money between a mix of stocks and bonds. Keep doing that through the rest of your working career, with the goal of saving 25 times your current level of spending by the day you retire.
Use a retirement calculator to make sure you’re on track. Ignore scary headlines in the financial news. You’re playing a long-term game. Getting caught up in the daily ups and downs of the market will only curb your progress.
What Percentage Of Your Salary Should Go Toward Retirement
How much money you need to be financially comfortable during retirement varies widely depending on the individual, and while it can be difficult to forecast exactly what youll need during retirement, there are benchmarks to aim for.
The ideal savings rate varies by expert or study because making plans for the future depends on many unknown variables, such as not knowing how long youll be working, how well your investments will do, or how long you will live, among other factors. Any calculation for retirement is usually an educated guess. However, it is possible to follow some key rules, starting with the assumption you will have a steady income stream until age 65.
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How Much Does A Couple Need To Retire
Much like an individual, how much a couple needs to save to retire comfortably will depend on their current annual income and the lifestyle they want to live when they retire. Many experts maintain that retirement income should be about 80% of a couples final pre-retirement annual earnings. Fidelity Investments recommends that you should save 10 times your annual income by age 67.
Saving For Retirement In Your 60s
Retirement is around the corner in your 60s, and the times almost come to enjoy the money youve worked so hard to save. Consider shifting to capital preservation and income-generating investment strategies. These fixed income investments tend to be stable bonds or fixed annuities aimed to keep the money youve saved over the years safe.
As youll most likely be entering the last of your full-time working years, youll want to keep saving as aggressively as you can.
Emergency fund: Consider upping your cash savings to one years worth of living expenses, so you have more cash on hand for things like medical expenses.
Additional savings: Review your risk tolerance and investment strategy with an eye toward capital preservation. Financial advisors may be particularly helpful now in helping you figure out how to handle the asset allocation of your retirement funds.
Educational savings: If you have children still in college or grandchildren whose college youd like to help out with, you can continue contributions to 529 accounts.
Retirement savings: Make sure youre contributing as much as you can before you retire. By the time you turn 67, you should have 10 times your annual salary in retirement savings.
Catch-up tips: Even after retirement, there are always part-time jobs that can supplement your income as you adjust to living on your savings and Social Security income.
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When You Plan To Retire
The age you plan to retire can have a big impact on the amount you need to save, and your milestones along the way. The longer you can postpone retirement, the lower your savings factor can be. That’s because delaying gives your savings a longer time to grow, you’ll have fewer years in retirement, and your Social Security benefit will be higher.
Consider some hypothetical examples . Max plans to delay retirement until age 70, so he will need to have saved 8x his final income to sustain his preretirement lifestyle. Amy wants to retire at age 67, so she will need to have saved 10x her preretirement income. John plans to retire at age 65, so he would need to have saved at least 12x his preretirement income.
Of course, you can’t always choose when you retirehealth and job availability may be out of your control. But one thing is clear: Working longer will make it easier to reach your savings goals.
Estimate Future Income Needs

Fair warning: This step involves the most work but power through, because the others are a breeze. And if you keep even a loose budget, you already have a leg up. Projecting future income requirements begins by taking a look at current spending.
To do that, enter your typical monthly expenses in the first column of a spreadsheet or jot them on a piece of paper. Then do a little thinking about whether each expense will stay the same, go down, go up or best of all disappear in retirement. In a second column, write your best guess of what each expense will be in retirement.
Add those up, tack on other things you may not budget for now but want to spend money on later travel, golf, mahjong supplies, ballroom dance lessons and you will have a rough idea of your monthly spending needs in the future. Multiply by 12 to get the income youll need each year to meet those expenses in retirement. Compare that to your current income to arrive at whats called a replacement ratio, or how much of your income you should aim to replace in retirement.
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Make Savings A Priority
Keep your eye on your dreams. Do the best you can to get to at least 15%. Of course, it may not be possible to hit that target every year. You may have more pressing financial demandschildren, parents, a leaky roof, a lost job, or other needs. But try not to forget about your futuremake your retirement a priority too.
Multiply Current Annual Spending By 25
Here’s a broad rule of thumb that you can use to figure out how much money you’ll need when you retire: Multiply your current annual spending by 25. That’s what your savings will have to be in retirement to allow you to safely withdraw 4% of that amount every year to live on.
You’ll need an investment portfolio that’s 25 times $40,000 a year$1 million at the start of your retirementif you spend $40,000 per year now. This sum allows you to withdraw 4% in your first year of retirement, and that same 4% adjusted for inflation every year going forward. You’ll maintain a decent chance that you won’t outlive your money.
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Asset Allocation Can Have A Big Impact On A Portfolios Ending Balance
Assumes a constant asset allocation, a 75% confidence level, and withdrawals growing by a constant 2.47% over 30 years. Assumes a starting balance of $1 million. Confidence level is defined as the number of times the portfolio ended with a balance greater than zero. See disclosures for additional disclosures on allocations and capital market estimates. The example is hypothetical and provided for illustrative purposes only. It is not intended to represent a specific investment product and the example does not reflect the effects of taxes or fees.
Remember, choosing an appropriate mix of investments may not be just a mathematical decision. Research shows that the pain of losses exceeds the pleasure in gains, and this effect can be magnified in retirement. Picking an allocation you’re comfortable with, especially in the event of a bear market, not just the one with the greatest possibility to increase the potential ending asset balance, is important.
How To Determine The Right Percentage Of Annuities
Investment advisors often say a portfolio for an investor nearing retirement should be 40 percent stocks and 60 percent bonds to provide safe investments and growth. However, investors can use annuities in place of bonds to have even more certainty.
Some experts in investments and annuities recommend making your portfolio 50 percent annuities to provide safety in volatile markets. For investors with higher risk tolerances, the security of fixed annuities can free them to invest more aggressively with the other half of their portfolios.
Every investor has unique needs and should discuss their risk tolerance and goals with a financial professional before making any decisions.
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How Much Do I Need To Retire The Only Guaranteed Method To Save Money For Retirement
Shawn Plummer
CEO, The Annuity Expert
How much do you need to retire? When it comes to retirement planning, there are a lot of variables to consider. For example, how much money do you need to retire? What will your expenses be in retirement? How long will you live? These are all critical questions to be answered as part of your overall retirement plan. This guide will discuss some tips for retirement planning that can help answer these questions and help you achieve the retirement you desire.
What Percentage Of My Income Should I Put Into My Retirement Savings
It is suggested that you put at least 15% of your pre-tax income into your retirement savings account or 401. The percentage you set aside for retirement can change due to your particular circumstances, including how much youll need during retirement and how much you can afford to set aside each month. You can always use a retirement calculator to help estimate how much youll need in addition to Social Security.
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How To Save For Retirement In Your 50s
By the time you reach your 50s, youre heading for the home stretch. That doesnt mean, however, that youre done working or saving. This is the right time to pay off your mortgage and ensure your overall debt is at a minimum. Stay the course with your savings and speak to a financial advisor about gradually adjusting your investment strategy as you near retirement.
Emergency fund: Keep your emergency fund topped up, especially if unexpected expenses have come along.
Additional savings: Invest additional savings once you max out your contributions to individual and employer-sponsored retirement plans.
Educational savings: Once the kids head off to college, tap these funds to pay for college. Funnel the amount you were saving for college expenses into your retirement and taxable brokerage accounts.
Retirement savings: Review your contribution percentage annually. Once you turn 50, youre eligible for an increased annual contribution limits in tax-advantaged retirement accounts. If youre behind on your goals, take advantage of these increased thresholds. By the time you turn 55, aim to have seven times your current annual salary in retirement savings across all of your savings and retirement accounts. By the time you turn 60, you should have eight times your annual salary in retirement savings.
Catch-up tip: If you need some extra cash to sock away, you explore seasonal employment around the holidays to up your annual retirement savings rate.